The Tax-Free Savings Account, or TFSA, is a flexible registered account that can be used to hold a variety of asset classes such as equities, bonds, exchange-traded funds, and mutual funds. As any returns generated in the TFSA are exempt from Canada Revenue Agency taxes, it makes sense to hold a portfolio of dividend growth stocks, which allows you to earn a regular stream of passive income and benefit from capital gains over time.
Here are three such TSX energy stocks TFSA investors can buy and hold for fast-growing passive income in 2024 and beyond.
Tourmaline Oil stock
Shares of Tourmaline Oil (TSX: TOU) returned roughly 100% to shareholders after adjusting for dividends in the past 10 years. Valued at $20.6 billion by market cap, the TSX energy stock pays shareholders an annual dividend of $1.12 per share, translating to a forward yield of 1.9%.
While the dividend yield is not too attractive, these payouts have more than tripled in the last five years. In addition to a regular dividend, Tourmaline also pays shareholders a special dividend, which depends on its quarterly cash flows. After accounting for both payouts, its total yield stands at almost 11%, which is exceptional for a cyclical stock.
Tourmaline Oil explores and develops oil and natural gas properties in the Western Canadian Sedimentary Basin. Lower oil prices have meant the company will report free cash flow of $1.9 billion in 2023, much lower than the cash flow of $3.2 billion in 2022.
However, the TSX stock has a payout of less than 20%, providing it with enough room to strengthen its balance sheet and keep paying shareholders a special dividend.
Canadian Natural Resources stock
A TSX giant trading at an enterprise value of $105 billion, Canadian Natural Resources (TSX: CNQ) has created massive wealth for long-term investors. In the last 20 years, CNQ stock has returned a whopping 1,800% in dividend-adjusted gains.
The energy heavyweight has raised dividends by more than 20% annually in the past 23 years, showcasing the resiliency of its cash flows.
Despite its outsized gains, it currently offers you a tasty dividend yield of 4.8%. Priced at nine times forward earnings, the TSX stock also trades at a discount of 15% to consensus price target estimates.
Enbridge stock
The final TSX dividend growth stock on my list is energy infrastructure titan Enbridge (TSX: ENB). Down 28% from all-time highs, ENB stock offers you a high dividend yield of 7.7%. It pays shareholders an annual dividend of $3.66 per share, and these payouts have risen by 10% annually for the last 28 years.
A majority of Enbridge’s cash flows are backed by inflation-adjusted long-term contracts, enabling it to generate cash flows across business cycles and maintain its payouts. It continues to invest in capital projects and highly accretive acquisitions, which should drive future cash flows and payouts higher.
Enbridge’s cash flows are relatively immune to fluctuations in commodity prices, making it among the safest dividend stocks in Canada. Priced at 16 times forward earnings, Enbridge stock is trading at a discount of 10% to consensus price target estimates.
